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Does Federal Student Aid Raise Tuition? New Evidence on For-Profit Colleges

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  • Stephanie Riegg Cellini
  • Claudia Goldin

Abstract

We use administrative data from five states to provide the first comprehensive estimates of the size of the for-profit higher education sector in the U.S. Our estimates include schools that are not currently eligible to participate in federal student aid programs under Title IV of the Higher Education Act and are therefore missed in official counts. We find that the number of for-profit institutions is double the official count and the number of students enrolled during the year is between one-quarter and one-third greater. Many for-profit institutions that are not Title IV eligible offer certificate (non-degree) programs that are similar, if not identical, to those given by institutions that are Title IV eligible. We find that the Title IV institutions charge tuition that is about 78 percent higher than that charged by comparable institutions whose students cannot apply for federal financial aid. The dollar value of the premium is about equal to the amount of grant aid and loan subsidy received by students in eligible institutions, lending some credence to a variant of the “Bennett hypothesis” that aid-eligible for-profit institutions capture a large part of the federal student aid subsidy.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17827.

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Date of creation: Feb 2012
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Publication status: published as Cellini, Stephanie Riegg and Claudia Goldin, “Does Federal Student Aid Raise Tuition? New Evidence on For-Profit Colleges.” American Economic Journal: Economic Policy, forthcoming.
Handle: RePEc:nbr:nberwo:17827

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Cited by:
  1. Darolia, Rajeev, 2013. "Integrity versus access? The effect of federal financial aid availability on postsecondary enrollment," Journal of Public Economics, Elsevier, vol. 106(C), pages 101-114.
  2. repec:hal:wpaper:halshs-00870546 is not listed on IDEAS
  3. Gabrielle Fack & Julien Grenet, 2013. "Improving College Access and Success for Low-Income Students: Evidence from a Large Need-based Grant Program," PSE Working Papers halshs-00870546, HAL.
  4. Brad J. Hershbein & Kevin Hollenbeck, 2013. "The Distribution of College Graduate Debt, 1990 to 2008: A Decomposition Approach," Upjohn Working Papers and Journal Articles 14-204, W.E. Upjohn Institute for Employment Research.
  5. Gabrielle Fack & Julien Grenet, 2013. "Improving college access and success for low-income students: Evidence from a large need-based grant program," Economics Working Papers 1393, Department of Economics and Business, Universitat Pompeu Fabra.

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